$2 Gas Flows Again In State Summer Driving Season, Blend Changeover Cited

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The Arkansas average price for regular gasoline topped $2 on Wednesday for the first time in more than six months.

AAA reported that regular gas averaged $2.007, up about 8 cents in a week and 40 cents since New Year’s Day. The national average was $2.11.

Experts attributed the rise in gas prices to a combination of factors, including: signs of improvement in the economy, seasonal turnover in gasoline blends, the beginning of driving season, and speculation by traders.

Paul Kroger, children’s pastor at Fellowship Bible Church in Little Rock, regularly fuels up a 15-passenger van that gets 10 miles to the gallon. He and his wife, Teresa, have eight children, seven drivers in the family and six cars.

"Obviously, anything that encroaches on our budget makes a difference on other areas," he said, noting that higher gas prices often mean higher prices for groceries and other necessities. But $2 isn’t as bad as $4, he added.

Last July, gasoline prices spiked to a high of $3.972 in the state, as crude oil hit $147 per barrel.

Arkansas should not see gasoline prices even approaching $3 for the rest of the year, according to Tom Kloza, director of Gaithersburg, Md.-based Oil Price Information Service.

"We’ll probably go a bit higher in the next 15 days, but I believe this is the typical overreaction" from speculators hoping for a good driving season, Kloza wrote in an e-mail.

The U.S. Energy Information Administration’s Short-Term Energy and Summer Fuels Outlook report predicts an average national price of $2.23 per gallon for the summer driving season of April through September. That’s $1.60 less than the same period last year. During 2009, the price of gasoline should average $2.17, the agency predicted.

Phil Flynn, vice president and energy analyst for Chicago-based Alaron Trading Corp., said that refiners have been shutting down for maintenance and to switch over to the cleaner-burning summer blend of fuels, something that usually increases prices.

"And because of the low demand for gasoline, the refiners have been taking their time about it," Flynn added.

Mike Right, spokesman for AAA, said that a run-up in wholesale gasoline prices and the price of crude oil has caused the latest spike.

Indicators suggest that demand also is starting to pick up, he said, adding that the country’s gasoline supply isn’t as abundant as crude oil inventories.

"It’s looking like people are getting back on the road," Right said.

While 2008 saw a decline in miles traveled, February, the latest month for which data is available, showed a slight increase in miles driven.

"It’s not up very much, but I think it’s going to be positive," he added.

The Energy Information Administration reported Wednesday that gasoline demand was down for the week ended May 1, to 8.92 million barrels per day from 9.15 million barrels per day the previous week. The four-week average was down by 25,000 barrels per day.

Demand for gasoline nationally was down another 1 percent last month, said Judy Dugan, researcher for Consumer Watchdog. "Yet prices are being shoved up by market speculation on nothing but hope that people will drive more," she added.

In Arkansas, average prices in Little Rock and Pine Bluff were nominally below the $2 mark at $1.992 and $1.993 respectively. Fayetteville and Fort Smith prices stood at $2.016 and $2.021. Texarkana had the highest price in the state at $2.028.

Natural disasters and geopolitical events aside, prices should be pretty stable in coming months, Flynn said.

"I hope we’re in a year of lower gasoline prices," he added.

Flynn also noted that the Organization of Petroleum Exporting Countries has cut back production to push up crude-oil prices and that traders are feeling better about the economy.

Kloza said that a spike in gas prices is a good sign, even if an overreaction.

"Crude oil prices are a proxy for the way that people feel about economic prospects, and for the moment, there’s some optimism," Kloza wrote in his e-mail.

Crude oil ended Wednesday up about $2 at $56.34 a barrel on the New York Mercantile Exchange, a level not seen since November.

Dugan said that the government needs to step in so that gasoline prices can’t be dominated by speculative traders, even if they’re positive about the economy.

"No one is seeing the price of cars go up just because there’s more activity in the housing market for a month," she wrote in an e-mail. "Car makers have to keep selling the cars at a steep discount until actual demand for cars picks up."

Consumer Watchdog
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